DemandChangePriceofSubstituteGood

by jwietl
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DemandChangePriceofSubstituteGood

I’m ______________________ speaking to you from Joliet Central High School, room 377 for the Institute for the Teaching of Economics in All Subject Areas. You are listening to:The Institute for the Teaching of Economics in All Subject AreasVolume Two, Issue ThreeDeterminants of Demand/Change in the Price of A Substitute GoodOwning a car and keeping money in our pockets provides an interesting trade-off, especially in these times of skyrocketing gas prices. Fortunately, in large metropolitan areas like Chicago there are alternatives to driving a car. The bus and the train, public transportation, can provide a substitute for the automobile, private transportation. Beginning in the 1920s, the huge increase in the size of Standard Metropolitan Statistical Areas (SMSAs), that is, cities and suburbs, led to an increase in the demand for electric trolleys, or railway cars. When automobiles were introduced, transportation lines were extended even further and electric trolleys lost passengers. However, many of the abandoned trolley lines were transformed into bus lines. By the middle of the 1920s, about 70,000 buses were operating throughout the United States. These changing demographics can be seen in the changes that took place in New York City in the 1920s. The number of residents decreased in Manhattan, the heart of the city and, meanwhile, one of the city’s suburbs, Queens, saw its population double. Then and now, commuters must choose between public and private transportation in traveling to their destinations. In light of rising gas prices, many commuters have looked at alternatives, or substitutes, to driving their cars to work and other places. According to economic theory, as the price of operating a private automobile increases, the demand for public transportation, a substitute, will also increase. This will cause the demand curve for public transportation to shift up and to the right. This shift will cause price to increase, and quantity demanded to increase.


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